Question

Aroon (25) has a loan from a qualified lender that he used to pay his college tuition. The lender cancelled the $19,743 balance of his loan in 2020. The cancelled debt may be excluded if any of the following are true EXCEPT he: Agrees to work for ten years as a nurse at a state hospital. Became permanently disabled. Died. Is unemployed for more than one year.

Answer 1

Ans) Is unemployed for more than one year

When debt is cancelled or forgiven, the amount of debt forgiven is considered as income and is chargeable to tax

However there are exception to above statement, means in following conditions cancelled tax will not be charged to tax

1) When a person dies or became permanently disabled

2) When one meets defination of financial insolvency

3) When one works with organisation that provides health care services in underserved ares

Thus being unemployed for more than a year do not fall under exception